Fintech has had an unprecedented impact on the economies and societies all over the world. As consumers embrace the latest innovations coming from fintech startups, they force the traditional financial institutions to adapt and start innovating.
But can fintech startups keep up with this pace? To succeed, they need to focus on scaling their products quickly. Despite the sector's expansion, fintech startups often lack the capital, staff, flexibility, or risk tolerance to reach their potential full potential.
When building the solutions they need in-house becomes too difficult, what can fintechs do to keep on scaling their products? Teaming up with an outsourcing partner is easily the best solution.
Read this article to find out what fintech companies stand to gain from outsourcing and how to collaborate with an outsourced team to focus on growth.
But first, why is scaling so important for fintech startups?
Here's a common scenario:
In its early days, a fintech startup needs to be lean and nimble. It rushed to release the product as quickly as possible. Most of the time, that comes in the form of a Minimum Viable Product, which allows testing the product-market fit early on.
However, that speed often comes with a tradeoff in quality. Once the fintech startup proves that its idea is viable and starts scaling its operations, it often comes out that the platform was built without scalability in mind.
And that's when fintechs face some critical software scalability challenges:
- Building a high-performing applications,
- Ensuring the security of customer data,
- Implementing Site Reliability Engineering to create scalable and reliable systems,
- Maintaining and scaling a monolithic codebase,
- Changing the programming language to one that offers more advantages,
- Refactoring code when a change affects different components,
- Managing and scaling the development team,
- Keeping the speed and accelerating time-to-market at the code base grows.
They're all serious challenges that may compromise the operations of even the most successful fintech companies.
Another challenging area for fintechs related to the problematic relation between technological innovation and local/international law regulations. It's clear that the latter fails to keep up with technological advancement in the financial services industry. Fintech startups often lack the experience and resources to set up compliance practices. Developing software in such an unstable regulatory environment may result in further security and compliance issues.
Fortunately, there's a way to manage all of that and keep on growing.
By teaming up with an experienced and skilled outsourcing company, fintechs can address all of these issues and scale their products.
Can outsourcing save fintech startups?
Outsourcing comes with many unique benefits that solve the most pressing problems of companies that rely on technology. Here's why outsourcing holds such great potential for fintechs today.
1. Access to top talent
To drive innovation, fintechs need to keep up their speed. And it's difficult to maintain your momentum when you're dealing with recruitment issues. Most fintechs operate in locations where sourcing and recruiting talented software engineers is expensive and time-consuming.
It's hard to build an in-house team when you're trying to grow your product. Moreover, access to employees who have skills in cutting-edge areas such as artificial intelligence (AI) or blockchain may be even more difficult.
How outsourcing helps: By outsourcing parts of software development, fintech companies can gain access to specialized knowledge and harness the power of technologies for their products. They can engage experts only for as long as they're needed as outsourced teams are fully scalable, removing the need to hire expensive professionals full-time (which comes with high overhead costs too). Moreover, startups can partner with a company that has extensive expertise in fintech and the required intellectual capital to drive innovation in this field.
Building an in-house team is expensive. You not only have to spend lots of money on recruiting candidates but also onboarding and training them (not to mention keeping them happy!). With full-time employees, expect to pay the incredibly high salaries of software developers and a range of overhead costs. For a startup, such costs could easily lead to compromising its survival when they go through a period of generating low revenue.
How outsourcing helps: By outsourcing software development, fintech companies don't need to pay any cost of recruiting and training experts - nor the benefits, perks, office space, and many other overhead costs. Moreover, startups don't tie themselves to paying the high salaries required to keep experts on board full-time. Outsourcing allows scaling the team up or down to match the evolving requirements of your project.
See how it works in practice - read this case study: How our team built key product features for the employee performance tool 15Five
3. Reduce the risk of a bad fit
Hiring a bad fit in a startup can have massive consequences, from slowing progress to compromising the budget. And you can't guarantee that the professionals you hire in-house will always be a great fit both technically and culturally. Hiring specialized resources can strain your capital that you could be allocated in other strategic priorities.
Many startups have built their products by taking advantage of talents they could never afford to hire full-time. Github, Slack, and Basecamp all relied on outsourced development in their early days. Actually, so did technology giants like Google or Alibaba. Relying on external expertise during the stage of rapid growth is a smart move.
How outsourcing helps: To ensure sustainable growth, fintech companies can use outsourcing solutions and improve their ability to flex their budget so that it fits the evolving priorities. At the same time, there's no need to make long-term commitments to in-house employees who may be a bad fit. Moreover, by teaming up with an experienced outsourcing company, you get a team of professionals who are experienced in collaboration and communication. That reduces the risk of hiring a bad fit – a mistake that can cost startups a lot.
4. Accelerate time-to-market
Speed matters a lot to startups. And to fintech startups, it matters even more. The competition in fintech is massive, and getting to market faster is critical. That's why fintech companies need to build, execute, and innovate efficiently. The most successful startups build their success in developing an execution machine that can rapidly deliver innovative products.
Here's how outsourcing helps: Outsourcing offers startups the ability to get skilled developers with proven experience on similar projects, without being slow down my recruitment. Moreover, fintechs can accelerate their operating thanks to the solid processes such experienced dedicated outsourced teams bring in. Another factor that speeds up the work is offshore development, where remote teams that are scattered through multiple time zones. That ensures continuous progress, even while you're asleep.
5. Higher quality
Fintech is a field where no compromises on quality are acceptable. Don't forget that your capital is not forever. Your funds may dry out if investors stop trusting you to deliver quality. And making a bad first impression on end-users of fintech apps can have catastrophic consequences.
How outsourcing helps: You can ensure the high quality of your product by choosing a company with an excellent track record in delivering fintech solutions to the market. This company will know your industry and business landscape. Its proven expertise on similar projects means that the team can deliver high-quality work fast. Moreover, outsourcing collaboration models like team extension allow startups to have greater control over the development team. You can quickly intervene if your expectations aren't being met.
- The extended team model: here's how to make it work
- Outsourcing best practices: 6 tips for coordinating internal and external development
How to scale a fintech product with a remote team
1. Pick the right partner
To get top quality and ensure smooth collaboration, it's best to follow the general advice for choosing an outsourcing provider. We covered it in this article: How to choose the right custom software development company
Is there anything particular to which fintech startups should pay attention? Definitely!
First, there's the domain expertise in fintech. Fintech solutions require experience in distributed development, integration with different payment systems, building high load systems, information security systems, and compliance, and cutting-edge technologies like blockchain. Your strategic partner should offer skilled resources and have plenty of experience in this area.
Second, there's technology expertise. Most fintechs use various types of financial technology that allows the fast delivery of an MVP and efficient development during the next stages of product development. That's why Python is such a popular programming language among fintech companies.
Read this case study to learn how we used Python to deliver a solution to our US-based client in the financial sector services industry.
2. Pay attention to security
When choosing an outsourcing partner, make sure that they comply with your security standards:
- Review the security policies and protocols of the outsourcing company - or establish them together with your prospective partner. That way, you will be able to launch a collaboration with the required level of trust.
- Another security-related issue is the non-disclosure agreement (NDA). Signing it is a must because that way you protect your business idea and product-related information. Make sure that your NDA includes the agreement duration, lists all the protected information, and contracted termination details and fines.
- Consider passive security techniques like encrypting sensitive data. Encrypt confidential information such as credit card numbers, Social Security numbers, etc.
- Other techniques worth considering our digital watermarking and fingerprinting. They allow managing sensitive data, and while they can't prevent potential data leaks, such methods make it easier to establish the source and quickly resolve the issue.
3. Choose the best model of collaboration
Teaming up with an outsourcing company can be based on different models of collaboration. In our experience, the most efficient model for fintech projects is the dedicated team. Here's why:
- A dedicated team will be working exclusively on your project full-time.
- Fintech scaling is a future-bound activity, so it's smart to team up with the company that will stay as your partner for a while.
- The team will possibly work on your project on a long-term basis, developing a solid knowledge base vital for streamlining further development.
- Team members will learn about your strategic goals and help you follow this direction.
- By hiring a dedicated team of software developers, you will have more control over the project and can delegate more responsibilities to your outsourcing partner.
Read this to learn more about this model:
Fintechs looking to scale their products in the most sustainable way are turning to outsourcing for many reasons. To stay nimble and lean, fintech companies can't afford to hire skilled professionals full-time. Instead, they can rely on external teams that are easy to scale up or down depending on the changing needs of their product.
Experienced outsourcing providers bring in the skills, but also experience in fintech and specialized knowledge startups might lack (for example, about compliance and regulations).
Why invest in building an expensive in-house team when you could benefit so much from outsourcing?
Get in touch with us if you're looking for a team experienced in building and scaling fintech products. We have experience working in fintech and have helped clients in the sector to build MVPs and grow their products.